Contents. EMS Group. Financial Statements

Transcription

1 53 rd ANNUAL REPORT 2015 / 2016

2

3 Contents EMS Group Annual Review 2 Share Performance 4 Management Report Key Figures Corporate Governance 8 Remuneration Report 17 Report of the Statutory Auditor on the Remuneration Report 18 Financial Statements EMS Group Consolidated Income Statement 19 Consolidated data Consolidated Balance Sheet 20 for the calendar year 2015 Consolidated Statement of Changes in Equity 21 Consolidated Statement of Cash Flows 22 Notes to the 23 Report of the Statutory Auditor on the 60 EMS-CHEMIE HOLDING AG Income Statement 62 data for the financial year Balance Sheet 63 May 1, 2015 April 30, 2016 Notes to the Financial Statements 64 Proposed appropriation of available earnings 67 Report of the Statutory Auditor on the Financial Statements 68 Adresses of EMS Companies, Switzerland 69 Adresses of EMS Companies, Worldwide 70 1

4 Annual Review The business year 2015 started with a major challenge. On January 15th the Swiss National Bank surprisingly discontinued the minimum exchange rate Euro/Swiss Franc and, as a result, an overvaluation of the Swiss Franc abruptly occurred. EMS generates 96.6 % of net sales outside of Switzerland, but manufactures 45 % of total products in Switzerland. Due to currency effects, net sales in Swiss Francs were diminished. The major part of costs, however, remained unchanged in Swiss Francs resulting in earnings under pressure. Therefore, rapid action was required by Senior Management taking measures to compensate the currency-related earnings erosion. A comprehensive growth offensive was launched worldwide. Costs were handled with care and the running efficiency programs accelerated. In this way, costs could be reduced to a slightly lower level than planned. Favorable raw material prices also supported positive result development. The main markets China and USA showed a positive trend, but slowed down. Europe recovered to show a slight growth trend. EMS developed new applications and further strengthened market positions worldwide. It was possible to realize numerous new structural components with high-performance, cost-efficient and weight-saving solutions using high-performance specialty polymers from EMS and to generate new business. Overall, sales volumes were increased by 7.0% compared to the previous year's figures. Despite massive negative currency effects, operating income (EBIT) closed at CHF 469 million and even exceeded the record value of the previous year by 10.7 %. In order to manufacture these pleasing sales volumes in the required time frame, EMS initiated a supplementary investment program in Switzerland at the end of April with an additional CHF 35 million for new production capacity for high-temperature and metal-replacement products. The first 2

5 production lines already started production midyear. In Suzhou (China), EMS opened a new application and development center for high-performance polymers in November. In Shanghai, EMS-EFTEC opened a new engineering location for automated application of process materials for the automotive industry. In Changshu (China) the cornerstone for a major new production site to become operative by the end of 2016 was laid. EMS customers make a conscious decision for close cooperation in development work together with innovative technology, high quality and rapid reaction time. In 2015 again, EMS received prestigious awards for such successful cooperation work. General Motors, one of the largest automotive manufacturers in the world, honored EMS for the sixth year in succession as Global Supplier of the Year. In addition, EMS won three Innovation Awards as well as the Grand Innovation Award given by the International Association for Plastics Technology SPE. EMS always goes for innovation. To celebrate the 80-year company anniversary, EMS opened the first Science Center in the Canton Grisons (Switzerland). This offers public access to more than 50 experiments free of charge. The intention is to awaken the interest of young and old for natural sciences and technical inventions, support teachers with attractive MINT subjects and provide the tourism industry in the region with a new offer all under the motto of Please touch! now contribute even better to a successful strategy for the region and Switzerland. For the business year 2016, EMS is expecting an overall slowing world economy. Major challenges in terms of security, finance and economic policies will influence growth. Uncertainty can be noticed with consumers and investors and affects development and stability of the markets. EMS is quite confident, however, for its own business development. The successful strategy of worldwide growth with specialty products will be continued and focus put on exploiting global market potential with new, innovative products and applications as well as on strengthening market position. In 2016, EMS will not rest on this success. New chances are to be discovered and made use of in an innovative way in order to further follow customers needs in international markets and always being ahead. Great commitment by our employees and our management make this possible by showing considerable flexibility, using their skills and their broad experience every day to the benefit of EMS, our customers and you, our shareholders. They have all earned a very special thank you. We also thank you, our shareholders, for your faith in EMS. We look forward to successfully shaping the future together! Furthermore, EMS has always been politically active to ensure good business framework conditions in Switzerland. With her election to Swiss parliament as a member of the Swiss National Council in autumn 2015, Magdalena Martullo can Dr Ulf Berg Chairman of the Board of Directors Magdalena Martullo-Blocher CEO and Vice-Chairman of the Board of Directors 3

6 EMS-Group Share Performance Number of registered shares Shares entitled to dividend Treasury shares Information per share (in CHF): Dividend per share ) Of which ordinary dividend Of which extraordinary dividend Earnings per share Cash flow per share 2) Equity per share 3) Stock prices 4) High Low At December Market capitalisation on December 31 (CHF millions) Registered shares are listed on the SIX Swiss Exchange. Security number ISIN Investdata/Reuters EMS-CHEMIE CH EMSN 1) Proposal of the Board of Directors. 2) Cash flow = net income plus write-downs on intangible assets, property, plant and equipment plus value adjustments to securities. 3) Excluding non-controlling interests. 4) Source: Bloomberg. 4

7 Management Report 2015 EMS-Group Business development As expected, the economy developed in an overall positive way in While growth in North America was favourable, China showed a significant temporary slowdown. Europe recovered slightly, supported by a weaker Euro and lower oil prices. EMS successfully realised planned new business worldwide in both areas of High Performance Polymers and Speciality Chemicals. The growth offensive launched at the beginning of the year generated additional business in all sectors and supported further strengthening of market positions in all markets. Consolidated net sales in Swiss Francs closed in 2015 at CHF million (1 972) which, due to currency effects, is 3.4 % below previous year. Growth of net sales in local currencies was 3.7 % compared to previous year. Net operating income (EBIT) rose to CHF 469 million (423) which is 10.7 % above previous year. The operating cash flow (EBITDA) increased by 9.7 % compared to the previous year to reach CHF 525 million (478). The EBIT margin was 24.6 % (21.5 %), the EBITDA margin 27.5 % (24.3 %). For the business year 2016, EMS is expecting an overall slow and unstable world economy. Governments in all parts of the world are under pressure to react to major challenges in terms of security, finance and economic growth. Unpredictable political acts and measures may appear. Consumer and investor confidence may further weaken. In order to satisfy this growing demand, new production lines were installed above all for high-temperature and metal-replacement products at production locations in Domat/Ems (Switzerland), Germany and China. For 2016, EMS expects net sales and net operating income (EBIT) slightly above the previous year. Investments Overall investments in 2015 amounted to CHF 55 million (52). The majority of this sum was invested in expanding production capacity. Investment by application 55.3 % Capacity expansion 33.3 % Renewal/ rationalisation 11.4 % Quality/technical improvement Investment by country and region 71.1 % Switzerland 11.7 % Asia 10.9 % Europe 5.9 % NAFTA 0.4 % Others EMS Group production by country Switzerland 45.0 % Germany 11.4 % USA 10.6 % China 8.8 % Belgium 5.3 % Czech Republic 4.4 % Japan 3.8 % Mexico 2.3 % Taiwan 2.0 % Great Britain 1.8 % Spain 1.1 % Russia 0.7 % Brazil 0.7 % India 0.6 % Others 1.5 % 5

8 EMS-Group 6 EMS Group net sales by country Germany 21.9 % China 15.8 % USA 13.7 % Japan 6.1 % France 5.5 % Switzerland 3.4 % Italy 3.2 % Mexico 3.1 % Spain 2.3 % Great Britain 2.1 % Czech Republic 2.1 % Poland 1.8 % South Korea 1.7 % Austria 1.4 % Taiwan 1.3 % Brazil 1.2 % Sweden 1.2 % Canada 1.1 % Russia 1.0 % Slovakia 1.0 % India 1.0 % Romania 0.8 % Others 7.3 % Management structure At the 2015 Annual General Meeting, Dr Ulf Berg, Magdalena Martullo, Bernhard Merki and Dr Joachim Streu were elected to the Board of Directors for a term of office lasting until the next ordinary Annual General Meeting. Personnel At the end of December 2015, the EMS Group had a total of (2 865) employees (excluding apprentices), of whom (1 002) work in Switzerland, 830 (816) in the rest of Europe, 665 (669) in Asia and 354 (378) in America. At the end of the year, the EMS Group employed 141 (139) apprentices in Switzerland covering 14 (14) different vocational fields. A total of 38 (38) apprentices successfully completed their professional training during the year under review. Business areas The EMS Group operates globally in the business areas of High Performance Polymers and Specialty Chemicals. These areas are further structured into Business Units. High Performance Polymers EMS-GRIVORY produces customized high-performance polymers (as polyamide granules). Thanks to their high-performance properties and ability to cut processing costs, these materials are used in a variety of appli cations, particularly in the automotive industry, in the electrical and electronics industry, in optics, as well as in numerous other industrial sectors. EMS-GRIVORY Europe specialises in innovative solutions for customers in the field of injection moulding as well as extrusion and extrusion blow-moulding applications in Europe. EMS-GRIVORY Asia operates in the Asian market. EMS-GRIVORY America is responsible for business in North America. The EMS-EFTEC Business Unit is a specialist supplier to the global automotive industry in the areas of bonding, coating, sealing and sound-damping. In the 2015 business year, the core business of High Performance Polymers generated net sales of CHF million (1 703) and net operating income (EBIT) of CHF 411 million (369). Despite substantial negative currency effects it was possible to realise further new business with innovative structural parts and process materials. Focus will be continued on exploiting global market potential with high-quality, cost-efficient and weight-saving solutions using high-performance polymers. Specialty Chemicals EMS-GRILTECH specialises in the development and production of fibres, bonding agents for high-performance tyres, hotmelt adhesives and fusible bonding yarns for technical and textile applications, powder coating crosslinkers and reactive diluents. The EMS-PATVAG Business Unit produces ignitors for airbag gas generators. With its production mainly in Switzerland, the se condary business area Specialty Chemicals was also affected by negative currency effects and closed with net sales of CHF 251 million (269). The growth offensive launched at the beginning of the year resulted in an intensive strengthening of market positions and realisation of additional business in all sectors.

9 Key Figures EMS-Group CHF millions Net sales revenue Change in % against previous year 3.4 % +4.6 % +7.4 % +5.9 % +3.9 % Change in local currencies +3.7 % +7.8 % +8.7 % +4.9 % % Of which in Switzerland 3.4 % 3.9 % 3.9 % 4.5 % 5.3 % Net operating income (EBIT) Change in % against previous year % % % +8.7 % +4.4 % In % of net sales revenue 24.6 % 21.5 % 19.6 % 18.2 % 17.7 % Net financial income Income taxes Net income Change in % against previous year +9.5 % +7.9 % % % +4.3 % In % of net sales revenue 20.1 % 17.7 % 17.2 % 15.6 % 14.6 % Cash flow 1) Change in % against previous year +8.5 % +6.7 % % % +1.6 % In % of net sales revenue 23.0 % 20.5 % 20.1 % 18.7 % 17.8 % Investments In % of cash flow 12.5 % 12.9 % 15.2 % 13.5 % 25.7 % Balance sheet total Assets Current assets Non-current assets Equity and liabilities Current liabilities Non-current liabilities Equity 2) Balance sheet equity ratio 68.2 % 67.7 % 68.2 % 67.6 % 63.7 % Return on equity 29.2 % 27.4 % 26.8 % 23.8 % 22.8 % Number of employees on December 31 3) ) Cash flow = net income plus write-downs on intangible assets, property, plant and equipment plus value adjustments to securities. 2) Excluding non-controlling interests. 3) Excluding apprentices (2015: 141; 2014: 139; 2013: 132; 2012: 132; 2011: 134). 7

10 Corporate Governance Corporate Governance EMS-CHEMIE HOLDING AG, a holding company by Swiss law, is committed to responsible corporate governance and oversight. The structure and content of this report comply with the SIX Swiss Exchange Directive on Information Relating to Corporate Governance (DCG). Detailed principles and rules are also laid down in the company s Articles of Association at articlesofassociation and in the Organisational Rules of the EMS Group. All data refer to the situation as at December 31, 2015, except where stated otherwise. 1. Group structure and shareholders 1.1 Group structure The companies of the EMS Group are grouped together in the EMS-CHEMIE HOLDING AG, which has its registered office in Domat/Ems, Switzerland. EMS-CHEMIE HOLDING AG is the only listed company within the scope of consolidation. EMS registered shares (EMSN, ISIN: CH ) are listed on the SIX Swiss Exchange. As at December 31, 2015, the market capitalization of EMS amounted to CHF million. An overview of the unlisted subsidiaries belonging to the consolidated EMS Group can be found in note 32 in the financial section. Segment reporting by business area and geographical region can be found on page 32. The EMS Group is active worldwide in the two business areas High Performance Polymers and Specialty Chemicals. The organisational breakdown is based on product types. The Group s operating structure is as follows: Board of Directors CEO General Secretariat Finance/ Accounting HIGH PERFORMANCE POLYMERS SPECIALTY CHEMICALS 8

11 Corporate Governance 1.2 Significant shareholders In the 2015 calendar year, two shareholders held more than 3 % of the equity of EMS-CHEMIE HOLDING AG: EMESTA HOLDING AG holds % of the share capital of EMS-CHEMIE HOLDING AG and Miriam Baumann-Blocher 8.89 %. 1.3 Cross-shareholdings There are no cross-shareholdings with other companies. 2. Capital structure 2.1 Capital/ 2.2 Authorised and conditional capital in particular The ordinary share capital of EMS-CHEMIE HOLDING AG amounts to CHF No authorized or conditional capital exists. 2.3 Changes in capital Information on capital changes can be found on page 4 (Share Performance), in the financial section on page 21 (Consolidated Statement of Changes in Equity) and in note 16 (Share capital). 2.6 Limitations on transferability and nominee registrations On request, purchasers of shares of EMS-CHEMIE HOLDING AG are entered in the share register as voting shareholders without restrictions, provided they expressly declare that the registered shares were acquired in their own name and on their own account. The Board of Directors may decide to register or reject people whose request for registration does not include an express declaration that they hold the shares on their own account ( Nominees ), and with whom the company has entered into an agreement to this effect, in the register of shareholders with voting rights up to a maximum of 2 % of the share capital entered in the commercial register. The Articles of Association do not provide for any privileges or restrictions on transferability. 2.7 Convertible bonds and warrants/options There are no convertible bonds or warrants/ options issued. 2.4 Shares and participation certificates/ 2.5 Profit sharing certificates The fully paid share capital is divided into registered shares with a par value of CHF 0.01 each. All registered shares are entitled to dividends. Each registered share entitles the holder to one vote at the Annual General Meeting. No participation certificates or profit sharing certificates exist. 9

12 Corporate Governance 3. Board of Directors 3.1 Members of the Board of Directors/ 3.2 Other activities and vested interests Board of Directors Name Nationality Status Year of First elected Term of office birth in expires Dr Ulf Berg Swiss Non-executive 1950 August Magdalena Martullo Swiss Executive 1969 August Dr Joachim Streu German Non-executive 1956 August Bernhard Merki Swiss Non-executive 1962 August On December 31, 2015, the Board of Directors of EMS-CHEMIE HOLDING AG consisted of the following four members: Dr Ulf Berg (1950, Swiss citizen, M.Sc. and PhD in mechanical engineering) has been non-executive Chairman of the Board of Directors since August He worked for ABB (formerly BBC) in various managerial positions in Switzerland and abroad for more than 20 years until From 1999 to 2001, Dr Ulf Berg was COO/CEO of Carlo Gavazzi Holding AG. From 2003 to 2004, he was CEO of SIG Beverages Int. AG before moving to Sulzer AG as CEO in From 2007 to 2009, he was non-executive Chairman of the Board of Directors of Sulzer AG Switzerland. Dr Ulf Berg was a member of the Management Board Committee of Swissmem from 2004 to 2015 and since 2006 he was a member of the Board of Directors of Bobst SA Switzerland. Since 2012, Dr Ulf Berg is member of the Board of Greater Zurich Area AG, Switzerland, of Synagro Ltd., Baltimore, USA, and Am-Tec AG, Zurich. Dr Ulf Berg was elected Chairman of the Board of Directors of Kuoni Reisen Holding AG, Zurich, in He is partner of BLR Partners Ltd. in Thalwil, Zurich and member of the Board of Directors of various BLR-portfolio-firms. Magdalena Martullo (born in 1969, Swiss citizen, Master of Business Administration) is major shareholder, Executive Vice-Chairman of the Board of Directors and Chief Executive Officer of the EMS Group. She joined EMS in 2001 and took command of the Group in 2004 when her father was elected to the Bundesrat (federal council) of the Swiss Government and sold his shares to his four children. Due to her shareholding in the EMESTA HOLDING AG, she is today majority shareholder in the EMS-CHEMIE HOLDING AG together with her sister Rahel Blocher. Magdalena Martullo graduated at the Hochschule St. Gallen (HSG) in Business Administration. Before joining the EMS Group she held different positions with Rivella AG and Johnson & Johnson AG as well as various other positions in Switzerland and abroad. She also leads the Board Committee on Economic Policy for scienceindustries, the Swiss Business Association for Chemistry Pharma Biotech, where she has been a member of the Executive Board since Since 2015 she has been member of the National Council of Swiss Parliament as representative of the Swiss People s Party of Grisons. Dr Joachim Streu (1956, German citizen, Diploma and Ph.D. in organic chemistry) has been nonexecutive member of the Board of Directors of EMS-CHEMIE HOLDING AG since August He worked for BASF from 1984 to 2011 where he held many international responsibilities. From 1987 to 1995 he was active in different positions for the BASF subsidiary Elastogran GmbH (thermoplastic polyurethanes and polyurethane systems). From 1995 until 2001 Dr Joachim Streu was Director of BASF Polyurethanes in Brussels. From 1995 until 1998 he was Head of Marketing for the business of polyurethane chemicals worldwide, from 1998 to 2001 Vice President of the Global Business Unit Polyurethane Specialties. From 2001 to 2004 he was Group Vice President of the Global Business Unit Styrene. From 2004 to 2008 he 10

13 Corporate Governance was Head of BASF Management Consulting and from 2008 to 2010 Pre sident of the BASF Division Styrenics. Since 2012 Dr Joachim Streu has worked as an independent corporate consultant. Bernhard Merki (1962, Swiss citizen, Dipl. Masch. Ing. HTL) has been non-executive member of the Board of Directors of EMS-CHEMIE HOLDING AG since August From 1988 to 2013 he held different management positions within the Netstal Group, Näfels, Switzerland; the last ten years as CEO. From 2003 to 2012, Bernhard Merki served as member of the Executive Committee of the Krauss Maffei AG, Germany, and from 2006 until 2012 as Vice President of the Board of Directors of Netstal-Maschinen AG. From 2005 to 2012 he was President of EUROMAP, the European association for plastics and rubber ma - chinery manufacturers. Since 2010, Bernhard Merki is a member of the Board of Directors of RONDO Burgdorf AG and of the Seewer Holding AG, Switzerland, and since 2013 a member of the Board of Directors of Hermann Bühler AG, Switzerland. Since 2008, Bernhard Merki is also a member of the Board of Governors of the University of Applied Sciences and Technology in Rapperswil, Switzerland. He is CEO of the 4B Fenster AG in Hochdorf, Switzerland, since None of the non-executive members of the Board of Directors have ever been a member of any Executive Management within the EMS Group, nor do any of them currently have a direct or indirect business relationship with companies in the EMS Group. 3.3 Number of permitted activites outside the EMS Group As per Article 19 of the Articles of Association, members of the Board of Directors must not hold more than 15 additional mandates. Attendance at meetings of the Board of Directors and committees 2015 Name Function Attendance at meetings Board of Audit Remuneration Directors Committee Committee Dr Ulf Berg Chairman 8 1) 8 4 Magdalena Martullo Vice-Chairman and 8 CEO Dr Joachim Streu Member 8 8 1) 4 Bernhard Merki Member 8 4 1) Total meetings Total duration (hours) ) Chairman 3.4 Elections and terms of office The President and the members of the Board of Directors as well as the members of the Remuneration Committee are elected individually by the Annual General Meeting for a term of office lasting until the next ordinary Annual General Meeting; re-election is possible. 3.5 Internal organisational structure Duties of the Board of Directors The Board of Directors is the highest executive body of the EMS Group. It is responsible for super - vis ing and monitoring the company s management and that of its affiliated companies which together form the EMS Group. With the exception of the President and the Members of the Remuneration Committee, who are elected by the Annual General Meeting, the Board of Directors constitutes itself. The Board of Directors has delegated most of the operational management of the EMS Group to the CEO. Special tasks can be delegated to individual members of the Board of Directors or to separate special committees. 11

14 Corporate Governance Board committees: Members, tasks, areas of responsibility There are two committees: the Audit Committee and the Remuneration Committee. Their tasks and responsibilities are set out in guidelines. Both committees have assessment, advisory and moni - tor ing functions but no decision-making powers. As of December 31, 2015, the Audit Committee consisted of two non-executive, independent members of the Board of Directors (Dr Joachim Streu, Chairman, Dr Ulf Berg, member). It assesses the effectiveness of external reporting, internal finance and accounting, internal control systems and compliance with accounting principles. The Audit Committee makes recommendations to the entire Board of Directors regarding presentation of individual and consolidated financial statements to the Annual General Meeting. It also assesses the performance and remuneration of the external auditors. As per December 31, 2015, the Remuneration Committee consisted of three non-executive members of the Board of Directors (Bernhard Mer - ki, Chairman, Dr Joachim Streu, member, Dr Ulf Berg, member). The Remuneration Committee is concerned with the remuneration policy of the EMS Group (Board of Directors, Executive Management, senior executives). It supports the Board of Directors, in particular in the writing of the Remuneration Report. Working methods of the Board of Directors and its committees The Board of Directors and its committees meet as frequently as business demands. The Board of Directors held eight mee tings in 2015, each last - ing between one and five hours. The Audit Com mittee held eight meetings, each lasting be - tween one and three hours, while the Remuneration Committee held four meetings, each lasting be t ween one and two hours. The Head of Finance (CFO) also attends the meet - ings of the Board of Directors and the Audit Com - mittee. Other members of Executive Management and Heads of Business Units are invited to attend meetings of the Board of Directors when it discusses matters relevant to their areas of responsibility. To constitute a quorum, a majority of the members of the Board of Directors must be present. The Board of Directors makes decisions and carries out elections with a majority of the members present at the meeting. The Chairman does not have a casting vote. Resolutions can also be passed by telephone, electronic media or circular, provided that no member requests discussion in person. Individual members are obliged to abstain from voting on personal matters or on matters involving persons with whom they are closely associated. Members of Executive Management are invited to attend committee meetings where matters relevant to their areas of responsibility are to be discussed. The provisions relating to meetings and resolutions of the Board of Directors and to the requirement for its members to abstain, also apply to the com - mittees. At the next plenary meeting of the Board of Directors after their committees have met, the com - mittee Chairman reports on the proceedings and submits proposals to the Board for its decision. 3.6 Definition of areas of responsibility The Board of Directors makes decisions regarding all matters not reserved for the Annual General Meeting or another body by law, the Articles of Association or the Organisational Rules. Subject to article 716a of the Swiss Code of Obligations (non-transferable and inalienable duties of the Board of Directors), the Board of Directors has delegated most of the operational management of the EMS Group to Executive Management. These duties and responsibilities particularly include proposing the strategy for the EMS Group to the Board of Directors, achieving the operative and financial results of the EMS Group, reviewing the budgets and medium-term plans of Business Units, deciding on scheduled capital investments up to CHF 5 million and on unscheduled capital investments up to CHF 0.5 million, reaching decisions on the procurement of external capital (e. g. bonds, bank loans) up to CHF 30 million, issuing guarantees in accordance with the guarantee concept proposed to the Board of Directors, receiving periodic reports on business performance and all other significant events, deciding on the initiation and conduct of legal proceedings and submitting proposals to the Board of Directors for legal proceedings of fundamental significance, approving the organization up to the level of employees directly subordinate to Heads of Business Units, submitting proposals to the Board of Directors on the acquisition and disposal of equity holdings, assigning powers to the members of the board of 12

15 Corporate Governance trustees who protect the interests of the employer in EMS Group pension schemes, proposing authorised signatories to the Board of Directors, permitting heads of Business Units and their direct subordinates to accept seats on Boards of Directors, political offices or honorary offices, enacting the rules of the EMS Group and maintaining personal contact with executive managers of other companies and with important customers. 3.7 Information and control instruments vis-à-vis the Executive Management The Board of Directors receives consolidated quarterly financial statements prepared in accordance with IFRS. Along with the income statement, these mainly provide information on the balance sheet, the cash flow account and changes in equity. Additionally, at the end of each month, the Board of Directors receives a written report from the CEO regarding business performance during that month and the expected monthly result. On the 4th working day of the following month, it receives the monthly income statement with the most important key figures, which are compared with the budgeted figures and those of the previous year. It is also provided, in the same detail, with monthly updated forecast calculations for the end of the year. This serves to monitor the achievability of the budget. Furthermore, at each meeting of the Board of Directors, the CEO and CFO report on the course of business and on all matters relevant to the Group, while the two committee Chairmen report on the matters they have dealt with, detailing their significant findings and assessment and submitting proposals accord ingly. Every year, the Board of Directors discusses and approves the budget for the following year, as well as rolling medium-term planning for the next three years. The CEO in - forms the members of the Board of Directors of any extraordinary events with out delay by circular or other appropriate means. At Board meetings, any member of the Board may request information from other members or from Executive Management on any of the company s affairs. Between meetings of the Board of Directors, any member may request infor mation from the CEO on the course of business, and with the approval of the Chairman on specific business events, and/or may inspect busi ness documents. At their own discretion, members of the Board of Directors visit Group companies and participate in the two-monthly Management Meetings held by Executive Management with the Heads of the Business Units in order to form an independent view of the Group s operating activities and the implementation of its strategy. During the year under review, ten audits were conducted by Group Financial Controlling at Group companies as part of an overall audit plan approved by the Board of Directors and commissioned by Group Financial Controlling. These focused mainly on bookkeeping and compliance. Group Financial Controlling discusses all audit findings in detail with the companies and Business Units concerned, and the most important measures are agreed on. In the event of disagreement between the auditors and the company audited, the different positions are stated transparently. An audit report is prepared containing the overall audit findings. Members of the Audit Committee, the CEO and the CFO each receive a copy of every audit report. Following each audit report, the CEO and CFO present the Audit Committee with the measures to be implemented by Group management. All significant measures are continuously monitored by the Audit Committee. In the event of discrepancies, the CEO and CFO must comment on them and present proposals for corrective measures. Although Group Financial Controlling is subordinate to the CFO, it reports directly to the Chairman of the Audit Committee with regard to these activities. Group Financial Controlling also regularly keeps the Audit Committee informed of such changes in the field of accounting. The legal service of the EMS Group reports regularly to the Board of Directors on any legal changes important to EMS. Twice a year, the Audit Committee is notified of all litigation cases that are underway or impending. Besides the status of the individual cases, the report focuses on risks and opportunities they represent, costs and other possible effects. Risk management constitutes an integral component of planning and reporting activities at EMS. At Executive Management and Business Unit level, risks are identified annually as part of the mediumterm planning procedure and preparation of the budget for the following year. They are then weighted according to the gravity of the risk and probability of its occurrence. The identification and assessment of changes in risk play an important part in this process. Measures are defined to reduce significant risks. In the course of planning discussions, the CEO and CFO report to the Board of Directors on the magnitude of these risks and the implementation status of the measures taken to counter them. 13

16 Corporate Governance 4. Executive Management 4.1 Members of Executive Management/ 4.2 Other activities and vested interests The Executive Management of EMS-CHEMIE HOLDING AG is consisted of the following four persons: Magdalena Martullo (born in 1969, Swiss citizen, Master of Business Administration) is major shareholder, Executive Vice-Chairman of the Board of Directors and Chief Executive Officer of the EMS Group. She joined EMS in 2001 and took command of the Group in 2004 when her father was elected to the Bundesrat (federal council) of the Swiss Government and sold his shares to his four children. Due to her shareholding in the EMESTA HOLDING AG, she is today majority shareholder in the EMS-CHEMIE HOLDING AG together with her sister Rahel Blocher. Magdalena Martullo graduated at the Hochschule St. Gallen (HSG) in Business Administration. Before joining the EMS Group she held different positions with Rivella AG and Johnson & Johnson AG as well as various other positions in Switzerland and abroad. She also leads the Board Committee on Economic Policy for scienceindustries, the Swiss Business Association for Chemistry Pharma Biotech, where she has been a member of the Executive Board since Since 2015 she has been member of the National Council of Swiss Parliament as representative of the Swiss People s Party of Grisons. Peter Germann (born in 1959, Swiss citizen, Master of Business Administration) has been the EMS Group s Head of Finance (CFO) since 1994 interrupted by one year as Head of Finance with the Ascom Group and a member of Executive Mana - gement since January Peter Germann previously held a variety of management positions, his last position being Head of Finance with the Arbonia-Forster Group. Dr Rolf Holderegger (born in 1952, Swiss citizen, Dr sc. techn., Dipl. Chem. ETH) has been a member of Executive Management since October He joined the EMS Group in 1987 as Manager of Development & Technical Service. Since then he has held various senior positions, his last position being General Manager of the Profit Center Polyurethanes and Reactive Systems as well as Site Manager in Romanshorn, Switzerland, within the Business Unit EMS-EFTEC. Before 1987, Dr Holderegger held various leading positions with the Dow Chemical Company. Markus Kremmel (1960, Qualified financial expert) has been active for the EMS Group since From 1991 to 2001 he was responsible for the financial and accounting departement as well as mergers and acquisitions for the business unit EMS-EFTEC. In 2002 he became global Head of Business Development for EMS-EFTEC. In October 2015 he was appointed Member of Executive Management of the EMS Group as per January 1, Before joining EMS he worked for seven years in his parents company. Members of Executive Management are nominated by the CEO and appointed by the Board of Directors. They are subordinate to the CEO, whom they assist in the task of managing and supervising the EMS Group. Executive Management usually meets every two weeks. In addition, the Secretary General attends these meetings in an advisory function. The duties and responsibilities of Executive Management are listed in section 3.6 (Definition of areas of responsibility). 4.3 Number of permitted activities outside the EMS Group As per Article 19 of the Articles of Association, members of Executive Management must not hold more than 15 additional mandates. 4.4 Management contracts No management contracts with third parties exist. 5. Remuneration, shareholdings and loans Details about remuneration, participation and loans are given in the Remuneration Report on page 17 and 18, resp. in the appendix to the annual financial statement of the EMS-CHEMIE HOLDING AG in note Shareholders participation Shareholders participation rights are laid down in the Articles of Association of EMS-CHEMIE HOLDING AG ( 14

17 Corporate Governance 6.1 Voting-rights and representation restrictions Voting-right restrictions apply solely to nominees. No rules exist governing the granting of exceptions. A registered shareholder may only be represented at the Annual General Meeting by his/her legal representative, by another shareholder who has voting rights or by the Independent Proxy. Shareholders may also issue powers of attorney or directives to the Independent Proxy electronically. The Independent Proxy is elected by the Annual General Meeting for a term of office lasting until the next ordinary Annual General Meeting; re-election is permissible. Shares held by the company do not confer voting rights at the Annual General Meeting and do not bear a dividend. 6.2 Statutory quorums Unless not otherwise provided by law, the General Meeting of Shareholders shall pass resolutions and hold elections on the basis of an absolute majority of the votes casted. 6.3 Convocation of the General Meeting of Shareholders The Ordinary Annual General Meeting of Shareholders is convened in accordance with legal requirements and the company s Articles of Association. It is convened by publication of a single notice in the Swiss Official Gazette of Commerce (SHAB) and selected Swiss newspapers, and by written invitations sent to the addresses of the shareholders and beneficiaries entered in the share register. The period of notice is 20 days. Extraordinary General Meetings of Shareholders are held in the cases prescribed by law and as required. 6.4 Agenda One or more shareholders representing together 10 % or more of the company s shares may request that a particular item be added to the agenda. A request to add an item to the agenda must be submitted in writing at least 40 days in advance of the Annual General Meeting, specifying the subject to be discussed and containing the proposed motions. 6.5 Inscriptions into the share register The cut-off date for entering registered shareholders in the share register with regard to participation at the General Meeting of Shareholders is around 10 calendar days before the General Meeting. The cut-off date will in each case be determined by the Board of Directors and is stated in the invitation. Registered shares sold between the cut-off date and the General Meeting of Shareholders do not carry any voting rights. There are no rules governing the granting of exceptions. 7. Changes in control and defence measures 7.1 Duty to make an offer According to Article 3 paragraph 2 of the Articles of Association, a party acquiring shares above the legal threshold potentially triggering a public offer in EMS-CHEMIE HOLDING AG is not obliged to submit a public purchase offer (opting-out clause). 7.2 Clauses on changes of control There are no clauses relating to changes in control. 8. Auditors 8.1 Duration of the mandate and term of office of the lead auditor KPMG AG, Badenerstrasse 172, 8026 Zurich, Switzerland, has acted as the statutory auditor of EMS-CHEMIE HOLDING AG since The statutory auditor is appointed by the Annual General Meeting for a one-year term of office. François Rouiller has been the lead auditor since The person, leading the revision, is allowed to execute the mandate for seven years at the longest (art. 730a par. 2 CO). 8.2 Audit fees The EMS Group paid KPMG a global total of approximately CHF for services relating to the audit of the Group s annual financial statements. The net sales revenue audited by KPMG accounts for approximately 44 % of the EMS Group s total net sales. 15

18 Corporate Governance 8.3 Additional fees KPMG charged a global total of approximately CHF , comprising CHF for tax consultancy services, CHF for legal advices and CHF 0 for transaction-related advice (including due diligence). 8.4 Information tools pertaining to the external audit The Audit Committee monitors the independence and performance of the independent statutory auditor on behalf of the Board of Directors and verifies the financial reporting of EMS (regarding the meetings held see section 3.5, page 11). The independent statutory auditor was invited to attend one meeting of the Audit Committee. Executive Management is responsible for financial accounting and continuous financial reporting, including the internal control system. The independent statutory auditor, KPMG AG, is responsible for giving an opinion on whether the accounting records and the annual financial statements comply with Swiss law and the company s Articles of Association. KPMG AG is responsible for providing an assessment of the consolidated financial statements (income statement, statement of comprehensive income, balance sheet, changes in equity, statement of cash flows and notes), in ac cord ance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and with Swiss law. The Audit Committee is also responsible for monitoring the relevant activities of Executive Management and the independent statutory auditor. 9. Information policy EMS publishes quarterly net sales figures, together with a commentary on the course of business and outlook for the future. The half-year and annual financial statements are prepared in accordance with IFRS. EMS also issues ad-hoc reports on important events as and when they occur. Calendar of events of the EMS Group July 15, 2016: Half-year report 2016 (Media conference) August 13, 2016: Annual General Meeting 2016 of EMS-CHEMIE HOLDING AG End of August 2016: Definitive Half-year report 2016 October 2016: Third-quarter report 2016 February 2017: Annual results 2016 (Media conference) April 2017: First-quarter report 2017 Further details regarding dates can be found at Subscription to ad-hoc reports received by can be made at newsletter. Further information is available on the company website: If you have any further enquiries, please contact: EMS-CHEMIE HOLDING AG Fuederholzstrasse Herrliberg Switzerland Phone Fax info@ems-group.com 16

19 Remuneration Report EMS Group Remuneration system, competence and method of determining The remuneration system for members of the Board of Directors and Executive Management consists, as per the Articles of Association, of a fixed remuneration and a possible variable remuneration component, which are paid out in cash only. EMS has no participation plan. The fixed and any possible variable remuneration component are independent of each other. The variable remuneration component may form a central part of the overall remuneration package. The principle criteria for the variable remuneration component are the achievement of earnings targets and project objectives. The Board of Directors determines the variable remuneration component at its discretion taking target achievement into account. The remuneration sum is defined by the Board of Directors at the proposal of the Remuneration Committee and after consultation with the CEO. Variable remuneration components are paid in May of the following year. According to the current contracts, members of the Board of Directors only receive a fixed remuneration. In the reporting year, the variable remuneration component of members of Executive Management amounts on average to 53 % of the total remuneration sum (2014/2015: 69 %). Remuneration for the reporting period and comparison with previous period (audited by the Statutory Auditors) The following remuneration was paid in the reporting year ( ): 2015/ /2015 (CHF 000) (CHF 000) Board of Directors Function Remuneration Dr U. Berg Chairman M. Martullo Vice-Chairman and CEO Dr J. Streu Member B. Merki Member (since ) Total Board of Directors Executive Management Total remuneration paid to the Executive Management was Of this, KCHF (2014/2015: KCHF 1 825) was variable remuneration components. The highest remuneration for a member of Executive Management in the reporting year was KCHF (2014/2015: KCHF 1 073) and of this, KCHF 522 (2014/2015: KCHF 836) as variable remuneration component, paid to M. Martullo, independent of her remuneration as Member of the Board of Directors. Total remuneration paid to the Board of Directors and Executive Management was The remuneration is paid exclusively in cash. EMS has no stock option program. Advisory board There is no advisory board. No remuneration was paid to former members of the Board of Directors or Executive Management. Furthermore, all remuneration for current or former members of the Board of Directors, Executive Management and related parties was paid based on standard market terms. The current as well as former members of the Board of Directors, Executive Management and related parties did not receive any loans or credits. 17

20 Voting of the Annual General Meeting on remuneration According to Article 23 of the Articles of Association, the Board of Directors annually requests the Annual General Meeting for approval, for the Board of Directors and Executive Management separately, of the remuneration for the previous business year. Any remuneration already paid is subject to subsequent approval by the Annual General Meeting. Credit Facilities As per Article 20 of the Articles of Association, members of the Board of Directors and Executive Management may be granted loans and credit facilities. Such loans and credit facilities must not in aggregate exceed the amount of 50 MCHF, may only be granted on standard market terms and in compliance with the applicable withdrawal rules. Neither the current nor previous members of the Board of Directors or Executive Management or persons associated to them have received loans or credit facilities. Proposals to the Annual General Meeting 2016: Approval of the remuneration 2015/2016 Total sum of remuneration to the Board of Directors to be approved: KCHF 740. Total sum of remuneration to Executive Management to be approved: KCHF Report of the Statutory Auditor on the Remuneration Report 18 Report of the Statutory Auditor on the Remuneration Report to the General Meeting of Shareholders of EMS-CHEMIE HOLDING AG, Domat/Ems. We have audited the Remuneration Report dated June 13, 2016 of EMS-CHEMIE HOLDING AG for the year ended April 30, The audit was limited to the information according to articles of the Ordinance against Excessive remuneration in Stock Exchange Listed Companies contained in the table Remuneration for the reporting year and comparison with previous year on page 17 of the Remuneration Report. Responsibility of the Board of Directors The Board of Directors is responsible for the preparation and overall fair presentation of the Remuneration Report in accordance with Swiss law and the Ordinance against Excessive remuneration in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages. Auditor s Responsibility Our responsibility is to express an opinion on the Remuneration Report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Remuneration Report complies with Swiss law and articles of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the Remuneration Report with regard to remuneration, loans and credits in accordance with articles of the Ordinance. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatements in the Remuneration Report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the Remuneration Report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the Remuneration Report for the year ended April 30, 2016 of EMS-CHEMIE HOLDING AG complies with Swiss law and articles of the Ordinance. Zurich, June 13, 2016 KPMG AG François Rouiller Licensed Audit Expert Auditor in Charge Roman Künzle Licensed Audit Expert